Concept of New Product, Product Innovation

Concept of New Product

Generally the unacquainted product in market is called new product. Such product should contain one or the other newness in its quality. Since all kinds of products found in market cannot survive for ever, new products appear. So, there remains possibility of continuous development of new products. As new
technology, intense competition in market, customers’ wants and needs keep on changing; process of product development should be given continuity. After studying wants of customers and external environment, producers or business organizations should develop new product/goods. Most of the business companies or producers can get success in market competition from the new development of goods. So, paying attention to the consumers’ wants, production companies or business organizations should be engaged in development of new products.

Marketing experts and writers have defined new products to make clear the meaning of new products. Important definitions are as follows:

According to Prof. Philip Kotler, “New products include original products, improved products, modified products and new brands that the firm develops through its own research and development efforts.”
According to Prof. William J. Stanton, “If buyers considers to significantly different from competitive products in some relevant characteristics then it is indeed a new product.”

Any product comes that first in market is called new product. A company or firm can bring product into market by adding new features and quality to the old ones. To product new improved goods after scanning environmental factors by business organizations or firms is to develop new products. The above mentioned definitions also make it clear that inventing, modifying or imitating in products is to develop new product. In fact, new technology, competition, customers’ changed wants and changes in other environmental factors compel to develop new products. This task plays an important role for the success of each firm or business company.

Types of new Products

There are many technologies to invent products. Firms or business organizations can bring new products of different nature and quality to market by using new technologies. So, new products also can be classified into different groups. They are as follows:

1. Innovative product

The product got as a fruit of study, research and invention is called innovative product. Other products to substitute such products cannot be found in markets. So, these products are also called original products. Such products greatly help to meet the new wants of customers. A long time, labor and brain need to spend on the development of such products. So, only economically capable producers and skilled researchers can jointly complete such task. Then the newly invented products are supplied to markets to satisfy customers.

2. Modified product

If more useful products than those available are brought out in market as alternative, they are called modified products. In such products some newness can be found. The products can be modified by changing color, design, feature, package, brand name etc. to give newness. In this way, modified products can be brought in markets adding some quality and features. Such products become different in quality and feature from the old ones. In other words, difference in nature, shape, quality, size etc. than already available products in modified product.

3. Imitative product

To product similar products by imitating the products of other companies or business organizations is called imitative product. Even if same types of products have already come into markets, imitative products become new for the imitator company. Such products are produced because of long lasting and high demand in markets. Such imitative goods are produced with the hope that can control target market and meet high demand of the customers.

Need for Product Innovation

Wants, living standard, interest and needs of different consumers’ groups may change after certain time duration. Original products are needed to satisfy their wants. Such products should include new quality, features, new size, shape and design. Such products are searched to meet the demand, want, and need of target markets. This becomes possible only through research, analysis and study. The importance and need of innovation of new product can be mentioned as follows:

1. Technological mapping

Technological mapping is prepared by experts of special arts and knowledge. They can give suggestion about change of size, shape, quality, feature etc. Accordingly business firms invent new products. This creates need and importance of new products.

2. Environmental change

Business firms are influenced/ affected by political, economic, cultural and natural environmental factors in every society. Such factors compel business firms to invent new products, due to which the firms need to change and develop products.

3. Competitive activity

The modern business firms should pay special attention to competition. Those firms which cannot face competition cannot be long lasting. The business firms which wish to live long should carefully research and study it. Only after having careful research and study of competitors, new goods should be developed.

4. Market leadership

Renowned/ respected business firm should take leadership in market. So, such firms should develop and invent new products. For this, study and researches are also necessary. Big firms can invest sufficient capital in such task. As a result, new products appear in markets. Hence, the consumers can get opportunity to use wanted goods.

5. Changing activity of customer group

Wants, interest, needs and priorities get changes time to time. Their wants, interest, priority and needs should be accepted by business firms through researches and studies. On the basis of the same, products should be given new shape and size. The business firms can get success only after such new products enter into markets. In this way the need, wants and importance are reflected in them.

6. Failure of existing products

The product which has entered in any stage of its life cycle may get failure. The products may get failure due to weakness in feature and quality. They may disappear from market being unsuccessful in competition. So, there are many reasons of failure of products, due to which new development and invention is compulsory.

Reasons for Product Failure

New goods are produced with the intention that they should remain for long in market. Even then there remain possibilities of failure. Products may be unsuccessful for uncontrollable reasons. Similarly, due to lack of effective control by the firm products may get failure in target market. The main reasons for the failure of new products are mentioned as follows:

1. Poor quality

Most of the customers want to use quality products. If any product with low quality, less utility and feature entered into market, the customers do not accept it. In such situation, the marketed product gets failure.

2. Strong competition

The producer should fiercely compete with competitors in market. The company which becomes unsuccessful in competition cannot stay in market and its product disappears from the market. In this way, the product which cannot maintain its market gets failure. So, fierce competition is one of the reasons for the failure of any product.

3. Government regulations

Government of every country tries to keep control over every product. Quality, feature, level of products and social interest are determined by the regulations. If any product comes in market against the regulations, government puts restrictions and keeps control over the products. In such situation, the marketed products become unsuccessful.

4. Poor technology

The shape and size of the new products should be according to the demand of the customers. If they do not find products as they have wanted, they do not accept. In this way, products become unsuccessful in target market due to use of weak technology.

5. Price of the products

Price of the products should be fixed rationally. Both high and low prices may be harmful. Customers do not easily accept both the prices. So, due to irrational pricing, products may be unsuccessful in target market.

6. Cost of products

Investment should be made on researches and study for production of new goods. In this way, production price is high. It also directly affects price of the products. Such negative effect makes difficult to increase sale quantity. So, extra investment also becomes the sixth reason for the failure of products.

7. Market sector

If the sector of new products becomes narrow and weak, it cannot expand. Similarly, if the target is broken, new products cannot be successful. On the other hand, if the market segment is wrongly selected, new products cannot get success.

8. Poor management

Management aspect of Business Company should be very strong and effective. The management should pay attention to all the production affairs from arrangement of raw materials to the marketing new finished products. But implementation aspect of management becomes weak, new product becomes unsuccessful. In such situation, product distribution, advertising, promotion etc. cannot be effective due to which even marketed goods get failure.

Product Adoption and Product Diffusion

Product Adoption

The decision of a person for regular use of certain product is called product adoption of a person. Most of the customers may take decision to use products of established and reputed producers. In such situation, marketing experts should make efforts to attract customers who adopt huge quantity of the product. This becomes very fruitful to the producer. There are five levels of the final consumers of the new products. They are mentioned as follows:

1. Awareness

The customers want to take full information and knowledge about new products. They want to know about quality, feature, utility, price etc. of any new product. Even then they feel difficult to get sufficient information.

2. Interest

Customers express interest to know about the quality of the new product. After they have got all information, they can take decision to adopt the new products.

3. Evaluation

Customers evaluate and analyze new products with the intention to adopt the product. If the conclusion of the analysis and evaluation comes out positive, they decide to adopt the product; otherwise they give up the idea.

4. Trial

Customers think and taste the value and utility of the new product. For example, a customer who wants to buy a car takes buying decision only after taking trial and taste drive. This is the fourth stage of product taste/ trial.

5. Adoption

After being positive towards the new product, the customers may take decision to use it fully or partially. Also they may take such decision only after using new goods for certain period of time.

Product Diffusion

At first, new products take certain shape. Then some customers who want to make them first buyers get information about them. In such situation there starts expansion and spread of the products. The situation when market segments accept new products is called expansion of new products. The customers who first buy new products play an important role in expansion of the products. After the new products enter into markets, different groups of customers adopt the products at different times. Such groups or customers are mentioned as follows:

1. Pioneers

At this introduction stage of the products, the producer wants to supply the product to customers and promote. To do so, it is necessary to identify the first consumers. After they have been identified, description and information of the products should be provided. Only then the customers decide to buy and use the new products. The same customers give information about such products to other groups.

2. Early adopters

Sub groups within the population of the consumers of target market who first use new products are called early adopters. Such group also can be called opinion leader. They buy products for the promotion of social level. Such group is also called group of the respected persons of the society.

3. Early majority

The sub group can take decision to buy new product at the development stage of product. Due to influence of the early adopters, this group uses new products before expected time. This group tries to buy products earlier, even by experimenting new products, than usual or other customers’ groups.

4. Late majority

The group who takes decision to buy new products only at the maturity stage of new products, is called late majority sub-group. This group is attracted towards new products only after getting under social pressure. This group also becomes as big as early majority.

5. Laggards

The sub group, who takes decision to buy new products at fourth stage only after the product has gone through three stages in market is called laggard group. This group buys the products when the price is decreased or discount opportunity is available. Such consumers maintain traditional culture. They use much lower percent of the new products than the late majority consumers.
Product diffusion for different consumers' groups

Marketing activities in Different Stages of Product Life Cycle

Marketing activities in Different Stages of Product Life Cycle

The products to be used by consumers remain in different stages. So, marketing should pay attention towards the condition/situation of its products and consider what extra facilities should be given t supply to markets. Different activities should be conducted at different stages of the life cycle of the products. Such activities are called marketing activities.
The main activities can be mentioned as follows:

1. Marketing activities at introduction stage

At this stage, the new products enter into markets for the first time. So, the customers should be impressed that the new product is better than those found in the market. This is one of the many activities to be adopted at this stage. Pricing policy may also be adopted accordingly. Especially, the following activities may be conducted at this stage of the products:
  • Product: When the new products of a firm appear in market, the customers should be convinced that the new products are more useful than the old ones. It is also necessary to justify the utility of the new products is more than the others. Besides, after-sale services and conditions also should be explained to the customers.
  • Price: While fixing price of the new products, two main points should be kept in mind. (a) If it is to adopt a policy to earn full profit from a certain market, price should be fixed high. It is called market skimming strategy. (b) Another alternative method can also be applied. If it is to cover greater segment of market, low price should be fixed from which a success can be achieved at the introduction stage of the products.
  • Promotion: The consumers should be fully informed about the features, quality and utility of the new products. For this task, heavy advertisement, personal selling and other promotional activities should be conducted effectively through which the possible customers can be attracted towards the new product.
  • Place: At first, a proper channel should be selected at the introductory stage of the product. After selecting it, efforts should be made to enter the suitable market. If done so, there does not remain fear of failure.

2. Marketing activities at growth stage

Growth stage of product life cycle is the second stage of the product. At this stage, the firms or producers should adopt low pricing policy. Besides, the new products can also be properly distributed by entering to new distribution channels. The producers can foster different activities to promote sale of the products. At this stage, the following main activities should be conducted.
  • Product: At first, the marketing expert should change the quality of the product; he should include new features in the new product. It is also compulsory to provide effective after-sale services and warranty.
  • Price: The customers may be sensitive about price of the new products. So, the firm or producer should adopt a policy to fix low price at appropriate time, by which rational customers can be attracted.
  • Promotion: Full knowledge about the product or services should be given to the customers. Information about place and products should be made available in right time and right place. Personal sale, advertisement and other promotional activities should be increased properly.
  • Place: The producer should give more importance to the goal of market extension. Easy environment should be created to enter new markets. Such activities popularize the products and cover more area.

3. Marketing activities in maturity stage

Every firm or production company makes the objective to mobilize its resources and means in profitable areas. For this, weak products should not be supplied to new market segments. In fact, activities towards market modification and marketing mix modification should be conducted at this mature stage. The following activities should be conducted at the maturity stage of product life cycle.
  • Product: At first improvement should be made in quality at this maturity stage of product. Product differentiation is also equally important. Product mix should also be changed. The products which cannot compete in market should be abandoned. The improved product needs to be made reliable, long lasting and give new taste. Product improvement policy should be adopted for the same.
  • Price: At this stage, a healthy and proper competition takes place. So, price should be fixed on the basis of market competition. At this stage, low price should be fixed.
  • Promotion: At this stage, marketing expert should pay special attention to brand loyalty. Efforts should be made to increase such activities by properly using sale promotion equipment. After sales services should be made more effective, dependable warranty should also be provided to meet other terms and conditions after sale.
  • Place: At this stage, the producer or firm should use new distribution/ supply channel. This activity helps to stabilize product distribution. This activity helps to take new place in new market segment.

4. Marketing activities in declined stage

Market competition continues even in the declining situation of the product. When the demand for product becomes weaker, the product should not be produced. While adopting such strategy there remains least chance of losses. At this declined stage of the product life cycle, business can continue with the following activities:
  • Product: Producers or firms produce different types of products. Among them weak or less demanded products should be identified. Decision should be taken to abandon such goods immediately. The market of the weak products should be left uncared without improving the product.
  • Price: Demand for some products may continue. So, price should be increased of such products. On the other hand, there may not be demand for some other products; the price of such products should be decreased.
  • Promotion: No investment should be made on advertisement, personal sale and other promotional activities without carrying out product research and development. However, some specific market segment may be promoted for target customers.
  • Place: Declined stage is the weakest stage in the product life cycle of any product. So, at this stage only especially capable distribution channels should be given permission for product distribution.

Product Life Cycle

Meaning of Product Life Cycle

Even the non-living things have life cycle. The goods also have different stages as human beings have childhood, adolescence, adulthood and oldness. Passing through all the stages, goods also die. Any goods or service cannot remain in market for long after it has been produced. Consumers seek better products or services and try to find alternatives. Then the importance of the old products goes on decreasing.

The condition such as introduction, development, maturity and decline of product as a whole is called life cycle. The changes that appear in new technology, competition, changing interest of consumers etc. affect the life cycle of products. Sales of products, profits from the products also differ according to their life cycle.

Demand of all products appeared in the markets does not remain same for long time. Change in demand for some products occurs very soon, while very late for some others. So, market longevity of any product depends on their quality and nature of the products. Demands for quality products continue for long but demands for relatively low quality products go to peter out. So, the life cycle of all products does not remain the same. The nature of products and marketing strategy affect it. Life cycle of some products continues for many whereas some others end after shorter time. It becomes difficult to fix long or short life cycle of any product. However, the life cycle of machines and machinery goods becomes longer than that of the luxury and fashion goods. For easy understanding, some experts and writers have defined life cycle of product as follows:
According to Prof. Kotler, “Product life cycle is an attempt to recognize distinct stages in the sales history of the product.”
According to T. D. Kollat, R. D. Blackwell and J. F. Robinson, “Product life cycle is generalized more of sales and profit trends for a product class or category over a period of time.”
According to Harry L. Hansen, “The cycle has generally been described as an ‘S’ shaped curve consisting of four phases introduction, rapid growth, maturity and decline.”
From all these definitions, we become clear that all the forms/ conditions from production to death of a product as a whole is called life cycle of a product. Producers and suppliers should be well informed about different conditions of the life cycle of products. Such life cycle is often directly affected by the changes in technology, consumers’ interest and market competition. Different marketing strategies should be adopted according to stages of product life cycle.

Stages of Product Life Cycle

A seller has to face different threats, competitions, and problems and use opportunities while selling products. Any type of products should go through different stages. They can be classified in four parts. The stage when the products first enter in market is called introduction. At this stage quantity of sale and profit becomes low due to being new in the market. This follows the second stage. At this stage both the quantity and profit increase gradually. Going through these two stages, the products gain maturity. At this stage, a little decrease in sale quantity begins. No remarkable ups and downs in sale quantity and profit can be seen at this stage. After crossing the matured stage, the product reaches the declining stage. At this stage both sale quantity and profit gradually decrease. The following figure makes clear the life cycle of products.
Stages of Product Life Cycle

1. Introduction Stage

The childhood stage of any product is called introduction stage. This is the first stage of life cycle of products. This stage is also called pioneering stage. This is the stage to bring new products to the market through special marketing program. At this stage, the possible customers become totally ignorant about the new products. Due to high production cost, the price of the products also becomes high. Personal selling, advertising, promotional activities etc. should massively conducted. The customers do not easily accept the new products appeared in the market. So, different sale promotional activities should be conducted to create demand for the new products. Because of very low sale volume of the new products at the introductory stage, profit also becomes very low. At this stage, competing products also do not appear in the markets.

The introductory stage of the products is very costly as well as risky. If many of customers do not like the new products, there appears failure at the primary stage of the products. So, correct information should be given to the costumers. At this stage, there may be many features of the products. Among them, the main features are mentioned as follows:
  • Much expenses should be made on the sale promotional activities of the products at the introductory stage,
  • Sales rate growth becomes very low at this stage,
  • As the much expense is needed for sales promotional activities, profit becomes nominal or sometimes even loss at this stage,
  • Price of the new products at this stage becomes high,
  • At this stage, advertising customers are needed, because consumers do not show interest to buy new products.
  • The new products need not face competitions at this stage, as considerable competitors do not appear in the market.
They should be impressed that the new product is the best among the others found in the market. This is also one of the strategies to be adopted at the introductory stage. Besides, pricing strategy is the important one. The following strategies should be adopted at the introductory stage of any product:
  • Product: Efforts should be made to convince the customers that the new product is better than the others found in the market and has more utility.
  • Price: Two important things should be given more attention while adopting price strategy. If it is to earn satisfactory benefit from a certain market, more prices should be fixed. This is called market skimming strategy. If it is to cover wider market, price should be fixed low. This strategy can also be successful at the introductory stage.
  • Promotion: Information about quality, feature and utility of the product should be provided to the customers. For this, wide/ heavy advertisement, personal sale, and other promotional programs should be conducted effectively.
  • Place: At first a proper channel should be selected to supply new product. After selecting the channel, proper strategy should be adopted to enter suitable market.

2. Growth Stage

The stage when demand of product grows and competitors enter the market is called growth stage. This is the second stage of the life cycle of the product. As new consumers become interested to buy products, it is also called market acceptance stage. There remains possibility of failure at this stage due to economic and technological reasons. The products which become successful at the first stage, they can easily enter market at the second stage. As the customers and well informed about the new product, the number of customers and sale quantity can increase high. Due to daily increase in demand, production quantity increases causing decrease in per unit price.

At this stage, all the competitors request the customers to give priority to their products. as the customers become attracted towards the products, the firms or producers become successful to collect more profit. The number of competitors goes on increasing seeing the producer get success in reaping benefit. So, the producer should bring change in the quality and feature of the product, try to enter new market segment, decrease price and conduct promotional activities more effectively. If market competition cannot be faced through these activities, a new strategy should be adopted to bring improvement in the product.

Competition oriented pricing should be fixed at the developmental stage of the life cycle of the product. Besides this, new product development strategy also should be adopted. At this development stage, the following features prevail:
  • Because of large production in development stage, production cost becomes low and profit gradually increases.
  • Sale growth rate intensely increases at this stage,
  • As good opportunities for sufficient profit appear at this stage, new competitors enter the market and competition also increases,
  • Per unit price of product becomes low due to low production cost,
  • At this stage, business firm or Production Company brings changes in quality and feature of the product and adopts policy to enter new market segments.
At development stage, any producer or firm may adopt strategy to decrease price of products. At this stage, an arrangement should be made to supply products entering into new channels. Many types of marketing strategies can be adopted. During the developmental stage in life cycle of products, the following strategies can be adopted – 
  • Product: At first quality of products should be changed. Besides this, new features also should be added to the products. Warranty and after-sale services should be compulsorily given to the customers.
  • Price: Taking special consideration for sensitive customers in price, price decreasing strategy should be adopted in right time.
  • Promotion: The customers should be provided full information about the products or services. Personal sale, advertisement and promotional activities should be increased.
  • Place: Production firm or company should give more importance to market expansion strategy. For this an easy environment should be prepared for entering into new market segment.

3. Maturity Stage

The third stage of product life cycle is called maturity stage. At this stage appears a situation where market related cost and competition increase but price and profit decrease. After passing through development stage, the products get to maturity stage. In the beginning of this stage, the sale quantity goes on increasing at a low rate. Towards the end of this stage, both the sale quantity and profit go on decreasing. This stage is called declining stage of maturity. At this stage the economically weak firms disappear. But the firms which are able to face market competition adopt strategy of product promotion/ development and distinctive strategies. The firms/ companies may revise price, add new features to their products and enter new market segments, which help them maintain market.

At the maturity stage of the product life cycle, different features appear. Among them, the main features are low price, increasing competition, rising cost, declining profits. In short, the features of matured stage are as follows:
  • Although profit becomes stable in the beginning of the maturity stage, it gradually goes on decreasing later on,
  • Although the sale quantity increases in the beginning of maturity stage, it goes on decreasing later on, 
  • Comparatively, competition increases at this stage and begins price war. Weak firms or competitors try to retreat from market.
  • As price war becomes intense at this stage, there arises compulsion to decrease price repeatedly. 
Every firm aims to mobilize its means and resources only in profitable sectors. For fulfilling this objective, weak products should not be brought into new market segments. Specially, at this matured stage strategy towards improvement in product, product marketing and marketing mix modification should be adopted. Mainly the following strategies should be adopted at the matured stage of product life cycle:
  • Product: At first quality of the product should be improved. It is also equally necessary to give peculiarity to the products. Change in product mix also is necessary at this stage. Sometimes it becomes necessary to retreat from market competition and stop production immediately. In fact, improved products should be long lasting, attractive and reliable with new taste. For the same, product improvement strategy is adopted.
  • Price: At this matured stage healthy competition takes place. So, price should be fixed on the basis of competition. As far as possible the price should be fixed minimum.
  • Promotion: At this stage brand/ trade mark loyalty should be given special attention. Sale promotional equipment should be properly conducted and promoted. After-sale service should be made effective. Dependable warranty to fulfill other conditions and services also should be provided.
  • Place: At this stage, a business firm should also use new distribution/ supply channels. This helps, to some extent, to make product sale stable.

4. Decline Stage

The situation of decreasing price and profit of product is called decline stage. This is the old stage of product’s life cycle. At this stage, sale quantity, profit and demand decrease. Due to new technology, new development and appearance of new products in market, demand for the old products ceases. The change in the customers’ interests and wants also directly affects demand. It becomes difficult to recover even production cost. Firms find difficulty to maintain their existence, so they focus their attention to seek new opportunities. As the competitors try to find new opportunities, competition also slows down at this time. Even at this stage of product life cycle, a few customers may like the same products. The production firms or companies may sell their products by fixing special price.

This stage of life cycle is very challenging for the products. At this stage, the high level management should take a very rational decision whether to continue the existing production, or bring improvement, or produce new goods, or abandon old production style. If the firm decides to abandon production of the old goods, adoption of any marketing strategy is not needed. But, if such products are to be continued, immediately even short term strategy should be adopted. At this stage, the firm should be ready to produce new and improved goods and bring in market. 

At this declined stage profit reaches on the verge of end. This stage is also called ending or weak stage. At this stage, demand for goods descends to the zero degree and goods may almost come to an end. Some customers who do not want to change brand of goods may give continuity to the same goods. Specially, at this stage of product life cycle, the following features of product may appear.
  • As the competitors, at this stage, begin to search new opportunities, competition slows down.
  • At this stage, sale quantity may decrease due to change in the interest of customers and new technology,
  • Profit decreases to zero point, if necessary strategy could not be adopted in time, business firms may suffer direct loss,
  • Even at this, some certain customers do not change and like to use old brand products,
At this declined stage, a slight competition may take place. When the demand of products becomes weak, products should be terminated. With this strategy there remains the least possibility of loss. At the declined stage of life cycle of product, the following strategies should be adopted:
  • Product: The goods produced by any firm may be of different varieties. Among them weak products should be identified. After the weak products have been identified, decision should be taken to abandon them.
  • Price: Price of the products which maintains the market demand should be increased.
  • Promotion: Investment is not made on advertisement, personal sale and promotional activities without research and development. However, some special market segments can be promoted for the target customers.
  • Place: Declined stage of products is very weak stage. So, only the distribution channels having special capacity should be given permission for product distribution.
FEATURES OF THE PRODUCT LIFE CYCLE
S.No.
Features
Introduction
Growth
Maturity
Decline
1 Sales Low levels Rapid growth Peak level Declining
2 Price High Slightly lower Lowest Increasing
3 Competition Little Increasing Intense Decreasing
4 Profit None Rising Stable Low/none
5 Customers Innovators Mass market Mass market Loyal

Types of Product and Distinctive Features and Their Marketing Considerations

Types of Product and Distinctive Features and Their Marketing Considerations

Products are marketed after some time of their production. Products are of different types. Products can be classified on different bases. They can also be classified on the bases of utility, color, technology, durability, buyers etc. Nowadays, especially they are classified on the basis of utility/ value of study. Mainly they can be divided in two types/ classes as follows:
Classification of Products on the basis of Use/ Utility

1. Consumer goods/ Product

In simple meaning, the goods or materials bought to use or consumer are called consumer goods. Consumers buy such goods for the purpose of use. In other words, the goods bought for non-business purpose are called consumer goods. Pulse, rice, flour, milk, furniture, radio, television, different types of textiles, etc. are consumer goods. Such goods satisfy the needs of final consumers. Consumer goods also can be divided into different four classes to study. They are

a) Convenience goods: The goods the consumers buy time and again in simple way are called convenience goods. No long time or much cost needs to buy such goods. They can be bought easily at less cost and in short time. No plan is needed to buy these goods. It is also not necessary to use wisdom/rational in buying these goods. The consumers already know about price, quality, size, durability, taste etc. of the goods.

Generally, the goods which are compulsory for leading daily life and daily consumption are called convenience goods. Soap, match, cigarette, medicines, toothpaste, fruits, vegetables, newspapers etc. are some of the examples of convenience goods. No extra efforts need to buy such types of goods. Their per-unit price becomes very low. Neither comparative study nor any other suggestions are needed to buy these types of goods.

i) Features of the convenience goods: As the convenience goods are bought frequently, they are bought in small quantity with less risk. The main features of convenience goods can be presented as follows:
  1. Convenience goods are daily needs for the consumers,
  2. Convenience goods are often named due to which the consumers can easily identify them.
  3. The consumers need to buy convenience goods regularly,
  4. Per unit cost of consumer goods become relatively low,
  5. Such goods have very short life and are less durable,
  6. No extra effort needs to buy such goods,
  7. Consumers have full knowledge about such goods.
ii) Marketing consideration: Convenience goods are daily needs. Such goods are not sold by the producers themselves. The producers give selling responsibility to different intermediaries, due to which selling channel for such product becomes long. Producers themselves bear the responsibility for the flow of information about the goods. Many depots/ sale centers are established to facilitate consumers to buy goods easily. The following things should be considered in selling such goods.
  1. Arrangements should be made to sell convenience goods through retailers.
  2. Long distribution channel should be selected for selling such types of goods.
  3. The responsibility of advertising such goods should be taken by the producers themselves.
  4. As the decoration attracts customers, goods should be set in attractive order in shops certain.
  5. Such goods should be given certain brand.
  6. Such goods should be packaged in attractive manner.
  7. Low profit margin strategy should be taken by the producers.
b) Shopping goods: The goods which the customers buy giving more time and effort are called shopping goods. Buyer makes buying plan for shopping goods. The consumers should make rational decision to buy such goods. They buy these goods only after having compared to quality, price, size, original features etc. with substituting goods.

The consumers visit famous center markets or shopping centers for buying such goods. Since such goods are not related to daily life, the consumers may delay to buy them or postpone for some time. Refrigerator, computer, modern furniture, television, radio, car, motorcycle, camera, sewing machine, washing machine etc. are shopping goods. These goods become costly and take long time for selection.

i) Features of shopping goods: Shopping goods have various internal features. Buyers think seriously whether the benefit equivalent to the price from such goods can be taken or not. The customers make decision to buy such goods infrequently. The main features of shopping goods are as follows:
  1. More time and efforts need to buy shopping goods.
  2. Such goods become more durable than others.
  3. All the customers may not have full knowledge about such goods,
  4. Per unit price of shopping goods is more than other goods,
  5. Such goods are bought again only after a long period of time,
  6. Even if plan has been made to buy such goods, it can be postponed for some time,
  7. While buying shopping goods the customers compare with other substituting goods, study and analyze them.
ii) Marketing consideration: Shopping goods can be bought going anywhere if buyers like them. So, the shopping centers should be established in small number. Branding and packaging have no important role in such goods. Short distribution channel should be selected to supply such goods to the customers. Generally, the following things should be carefully considered in selling shopping goods.
  1. As decoration has no important role to attract customers, packaging need not be given importance,
  2. The supply channel for shopping goods should be short as far as practicable,
  3. Retailers’ role becomes effective in such goods. So, arrangement for selling goods through retailers should be made,
  4. Strategy for earning more profit from such goods should be made,
  5. Responsibility for advertisement of such goods should be given to retailers,
  6. As packaging of such goods has no importance, they should be packed suitably,
  7. The sellers of such goods should get full knowledge about quality, price, utility, operating methods etc. of such goods. Besides, the sellers should give warranty of services after sale.
c) Speciality goods: The goods having special nature are called speciality goods. The buyers buy such goods only after long efforts and long time. These goods become very different from others in nature and speciality. So, the buyers become enthusiastic/ eager to buy such goods. These goods are compulsorily given brand name. The buyers do not buy such goods comparing them with alternatives even if available in markets. They give priority only to special brand goods. Expensive sports goods, cars, ornaments, currencies, stereo-sound equipment, photographic equipment, old stamps, valuable suits, electric goods etc. are special goods. As such goods can be easily obtained, the buyers need to pay much price and wait for a long time.

i) Features of speciality goods: Special goods have very important nature. Such goods become branded and buyers give more importance to brand name. Such goods cannot be found in all shopping centers and shops. These types of goods are generally, bought on special occasions or important day of any member of a family or on important social occasion. So, the buyers who try to find special quality goods, who can remain patient for long time and are ready to pay much price buy these goods. The speciality of such goods can be presented in the following points:
  1. Speciality goods are bought only on special occasions,
  2. Special efforts are made and time is given to buy such goods,
  3. While taking decision to buy such goods, their price and quality are not compared with others,
  4. The buyers of such goods take buying decision giving more importance to certain brand of the goods/ trade mark.
ii) Marketing considerations: As the demand of speciality goods become very low, shopping centers of such goods should be very limited. Demand of such goods may be high on special occasions and sale may be in large quantity. As far as practicable, channel of supply of such goods should be shorter. The producers and sellers should make joint efforts for the advertisement of such goods. Following things should be carefully considered for marketing such goods:
  1. As the buyers do not give any importance to branding and packaging of speciality goods, they should be packed properly,
  2. Producers and sellers should make joint efforts for the advertisement of such goods,
  3. A strategy to fix more prices per unit and more profit margins should be adopted, 
  4. Decoration has no special role in selling such goods. So it is not necessary to give importance to decoration.
  5. Brand/ trade mark and store has special role in selling such goods,
  6. Shorter supply channel should be selected to sell such goods as the buyers buy them with their own special efforts.
d) Unsought goods: If the consumers do not seek goods due to ignorance or even knowing about them, such goods are called unsought goods. Some such goods remain in markets or shops, about which the consumers do not know anything and even if they have knowledge about them they do not buy at that time. They do not realize the necessity of such goods. As they have no desire to buy, they also do not evaluate about the real utility of such goods. New invented goods, life insurance, valuable stones, electronic car, encyclopedia, talking computer audio-video, telephone etc. can be included in unsought goods.

i) Features of unsought goods: The consumers do not take interest to buy these goods even if they know completely or little about them. As necessity of such goods is not realized, the costumers do not think to buy them. Some of the features of unsought goods can be mentioned as follows:
  1. As the necessity of unsought goods is not realized, no buying plan is made for such goods,
  2. As such goods have differences in their natures, their prices also become different,
  3. As the brand/ trade mark of these goods has no role, it has no significance,
  4. The consumers may or may not have knowledge about such goods; some consumers may not give interest for not having money to buy them.
ii) Marketing considerations: Some consumers do not buy unsought goods due to lack of knowledge about them and some do not buy for not being able to pay price even if they know their importance. So, while marketing such goods, some important considerations should be taken in as follows:
  1. Consumers may not have any knowledge about newly developed/invented goods, so information about such goods should be provided to the consumers,
  2. A strategy of personal sale and advertisement should be made to promote the sale of such important and unknown goods,
  3. Price of such goods which cannot be found everywhere can be fixed relatively more.
  4. As far as possible, short and direct channel should be selected to supply or distribute such goods.

Industrial Goods

The goods purchased for industrial purpose but not for domestic use are called industrial goods. As such goods are purchased for manufacturing/ making other goods, they are also called business goods. The industrial goods are used to produce new goods, and simplify the production work. Machineries, equipments, raw materials, fuel, operational supply, manufactured goods, main part of the whole structure etc. are the examples of industrial goods. The buyers of industrial goods are business organizations, organizational institution, private and government offices and producers. Such industrial and business goods also can be divided into five classes as follows:

a) Raw materials: The materials used to create new goods are called raw material. Finished goods are made by changing quality, shape and form of such raw materials. So, raw materials have an important role in production of new goods. Such basic materials are purchased by producers and business organizations. The raw materials are also divided into two categories as (a) farm products such as millets, wheat, barley, corn, paddy, cotton, tobacco, fruits, animal products etc. and (b) natural products such as gold, silver, iron, copper, coal, petroleum, herbs, valuable stones etc. As there are many producers of agricultural/ farm product, such products are supplied in many markets.

Comparatively, much effort needs to search, find, and identify natural goods. So, business men, or suppliers of such goods are found in limited numbers. As the suppliers or business men collect these goods by investing greater amount, this type of business may remain under control of limited business men. The natural goods become weighty and heavy. They have low unit value. Mostly, such goods are supplied by big producers and they establish direct relationship with industrial users. Therefore, business dealings may be conducted by having long term agreement/ contract between buyers and suppliers.

i) Features of raw materials: Raw materials are the part of any finished goods. The finished goods can be a quality good only if the quality of raw materials is good. Raw materials also need to be collected from different places or regions. Features of such materials may be different. Generally, the main features of raw materials can be mentioned as follows:
  1. Businesses or industries purchase raw materials regularly,
  2. The life of animals, agricultural products becomes very short,
  3. Per unit value of natural raw materials becomes low,
  4. Only some big businesses or producers deal in natural goods and supply also remains limited.
ii) Marketing considerations: While selling-distributing raw materials agreement/ contract may be done between buyer and seller. Quantity, price, distribution, quality, standard etc. is determined on the basis of the contract/ agreement. This should be sincerely implemented by both sides. As far as possible, very short channel should be used for supplying such goods. The main things to be considered in marketing are as follows:
  1. More attention should be given to the quality of raw material than to the brand/ trade mark.
  2. Shortest channel should be used for distribution of such goods,
  3. As competition becomes tough in agricultural/ animal products, a proper strategy should be adopted for such goods,
  4. No promotional activities need to be conducted in context of distribution/ supply of raw materials,
  5. No pre or post sale services are needed,
  6. As such goods become different in quality and nature, they should be carefully stored and transported,
  7. Long term agreement/ contract should be done for supplying such goods of different quality and standard.
b) Fabricating parts and materials: Raw materials or finished goods can be used in making any type of new goods. A new product can be made using two or more types of goods. In this way, the goods which are used as part of readymade goods are called fabricating, so they are also called finished materials. After including such materials in main product, new type product becomes ready. Such finished materials are used without changing their form to product the third goods. Motor tyres, buttons, zippers, batteries, machinery parts etc. are the examples of such goods. Per unit price of such goods becomes relatively low. The producers or business houses try to buy these goods as much in amount as they can.

i) Features of fabricating parts and materials: The fabricating parts or materials are used without changing their quality, form and nature to prepare a third product. These parts have an important role in new goods. They give completeness to the new made goods. They have various quality and features. They can be mentioned as follows;
  1. The fabricated goods or materials remain as important part of the ready-made products,
  2. The life of such goods depends on the parts and materials used in them,
  3. Per unit value of such products becomes relatively low,
  4. These types of parts or materials should be purchased in large amount.
  5. Industrialists do not buy fabricating parts or materials every time.
ii) Marketing considerations: The entrepreneurs decide to buy such goods on the basis of services and warranty of the sellers. Even of such situation is present, at least something about the materials should be given special consideration. If consideration about important thing is not given, marketing can be affected. As a result, other suppliers control the market and reap benefits. So, the following things should be considered while marketing such goods/ materials.
  1. Duration of contract or agreement between buyer and supplier of machinery parts and materials should be long,
  2. Supply or distribution channel of such goods should be short and direct as far as possible,
  3. Post sale services (service after sale) should be compulsorily provided,
  4. Promotional activities for such materials and machinery parts should be conducted,
  5. Branding of such goods is not given importance.
c) Installation: Big industrial capital equipment and instruments are called big machines. In other words, they are called substituting equipments. Such capital equipment becomes costly and long lasting. In the lack of these important machineries, raw materials cannot be changed into finished goods. Industrialists get encouragement to conduct business with the help of such equipment. These types of goods signify the scope, nature and efficiency of nay business organization. Generator, office building, offset machine, computer, lift, billing machines etc. are the examples of machines. As these machines and apparatus need huge investment, a rational decision should be taken to buy, collect and install them. Such decision is taken by high level management.

i) Features of installation: Big machines are the capital equipment of business organization. Collection, purchase or installation need to invest much amount of capital. Specialists are needed to install and operate some machines/ equipment. Such equipment and apparatuses may have many features. Among them the main are as follows:
  1. Comparatively, per unit price of big machines and equipment becomes high,
  2. As the price of such machines and equipment is high, they are not bought every time,
  3. As such equipment and machines have quality and are costly, they last long,
  4. Brand of such machines/ equipment and business organization plays important role.
ii) Marketing considerations: Entrepreneurs and industrialists make decisions to installation machineries/ equipment considering their brand. So, such equipment intermediaries are not needed in buying them. As such equipment and machineries are bought through contract/ agreement, the term/ duration of the agreement should be provided for such equipment. Special suggestions and advice should be taken from specialists of such machineries. While marketing such big machineries, special considerations should be taken as follows:
  1. After producing capital equipment, they should be given proper brand,
  2. Supply or distribution channel of such equipment should be short as far as possible,
  3. The seller should give assurance to the buyer for post sale service/ after sale service,
  4. Personal selling should be given preference rather than advertisement for sale promotion,
  5. The persons selling such equipment should be efficient, experienced and have technical knowledge.
d) Accessory equipment: The equipment and apparatuses which help in business activities are called accessory equipments. Such equipments and apparatuses are not directly used in production, even then they have significant role. Accounting machine, typewriter, hand tools, fork lift, pick, liver, tables, chairs, drawers etc. are some of the examples as such equipment and tools are less expensive and short lasting.

i) Features of accessory equipment: Accessory equipment and tools do not become any part of the products. However, they play an important role in production. Such materials facilitate production process. So, accessory equipment and apparatuses have many special features. They are mentioned as follows:
  1. The accessory equipment helps to make production easy and regular,
  2. Price of such equipment becomes average, 
  3. Life of accessory equipment becomes short,
  4. Purchase repetition of such equipment becomes medial compared to heavy machineries,
  5. As demand of such equipment becomes low, purchasing quantity is also low.
ii) Marketing considerations: Accessory equipment and apparatus are the only helping means in the process of production. Some business organizations may use direct channel to sell them while some may use intermediaries. An efficient business man wished to sell products by standardizing market price, quality of products, services etc. He may select supply channel considering demands received from different parts and places. While supplying such accessory equipments, mainly the following things should be considered:
  1. Although life of accessory equipment becomes very short compared to big machines, they should be sold through intermediaries,
  2. Trade mark/ brand of such equipment should be given more importance,
  3. Promotional activities should be conducted for such equipment, 
  4. Post sale/ service after sale should be provided in buyers needed,
  5. Agreement/ contract may be done to supply such equipment and the duration of contract should be of average type.
e) Operating supplies: The operating supplies help to conduct business activities continuously. The things which help to make production easy and regular are called operating supplies. But such goods can be the part of products. Operating supplies can also be delivery function or in the process of producing new product. Stationery, fuel, oil chemicals, petroleum, coal, furniture, clothes, etc. are the examples of the operating supplies. Per unit price becomes very low and life span becomes very short of such goods. These types of goods can be purchased daily and no special decision is needed to buy them.

i) Features of operating supplies: Operating goods cannot directly affect products; however, they provide great help in the process of production. Such indirect support becomes very important in businesses. Operating supplies have different features, the main are mentioned as follows:
  1. The operating supplies cannot be direct part of finished products,
  2. Per unit value of such goods becomes very low,
  3. Such goods have relatively short life,
  4. No much effort nor time is needed to buy such goods,
  5. As price of such goods has low price, they can be bought any time taking prompt decision.
iii) Marketing consideration: The operating goods are not supplied by the producers themselves. They make arrangement to supply/ sell through intermediaries. Some goods need branding and more advertisements and some need little. Term of contract for supplying such goods becomes short. The following things should be considered while marketing the operating supplies.
  1. Intermediaries should be used to supply operating goods,
  2. The duration of the contract for supplying such goods should be short,
  3. Post sale/ after sale service is rarely provided for such goods,
  4. Promotional activities are not important for such goods,
  5. Importance is not given to the brand/ trademark of such goods.

Meaning and Concepts of Product

The things which fulfill different human needs and give satisfaction are called products/goods. Physical element exists in most of the products/goods. Food stuff, cloths, book, copy, pen, machinery tools etc. have physical existence. There are also goods without physical existence. Doctors’ services, advocators’ services, experiences, ideas, personality etc. have no physical existence. Such things should fulfill consumers’ needs in proper time. If anything or material available in market cannot satisfy the human need, it cannot be said a product. To be counted as products or goods, they should give satisfaction and be useful. Some knowledge of marketing can be obtained by reading this page. Some knowledge of marketing can be obtained by reading this book. So this book can be supposed as a product. A watch kept in a room shows/expresses time, so it is also a product.

Any type of product should be taken as a very important component of marketing mix. This fulfils needs of the society. If there is lack of product/goods, marketing becomes unnecessary and meaningless. Product/goods are needed to accomplish exchange/bartering in market. Exchange becomes impossible in the absence of
products and without exchange marketing becomes impossible. In the lack of products, the components of marketing mix such as place, promotion and price also become meaningless. In the absence of products, advertisement, physical distribution, price etc. become like a motor without driver, classroom without teacher and a boat without a boatman. So, products/goods have the most important place in marketing. Different writers and experts have defined product/goods differently. Among them the important ones have been given as follows:

According to Prof. Philip Kotler, “A product is anything that can be offered to market for attention, acquisition, use or consumption and that might satisfy wants or needs.”
According to George Fisk, “A product is a cluster of psychological satisfaction.”
According to E. J. McCarthy, “Product involves developing the right product, which can be put in the right place and sold with right promotion and price.”
According to W. Alderson, “A product is a set of tangible and intangible attributes including packaging, color, price, quality and brand plus the seller’s service and reputation.”
According to Charles D. Scheue, “A product is the focus on bringing buyers and sellers together to make an exchange.”
The above definitions also make us clear that the meaning of goods is broad. Any consumer goods available in markets with the warranty, service before or after sale, with fee or free maintenance etc. are called products. The goods available in markets include model, quality, attribute, branding, packaging, services, warranty, color, reputation, price etc. In marketing, goods mean the sum total of physical economic, social and psychological benefits. So, goods have an important role in conducting marketing activities systematically. Hence, the goods can be taken as the engine for conducting marketing programs.

Levels of Product

Any types of products or services provide various benefits to the customers or society. They can be studied by dividing in different levels or classes. The study makes us clear that each product has five levels. These levels can be mentioned as follows:

1. Core product

The product which provides basic service is called core product. Such type of product provides different services and benefits to the customers. For instance, a student may buy copy and pen to write and book to study while a customer may buy/hire a comfortable room in a hotel to take rest.

2. Basic product

The goods which provide primary services are called basic products. For example, if a guest of a hotel hires a room, it needs cot, mattress, table, chair, towel, electricity, bath room etc. which should be available.

3. Expected product

Generally, the services or goods expected by a customer are called expected products. Such products have some attributes and conditions. For example, a guest of a hotel expects clean towel, clean bed, table, lamp, peaceful environment etc.

4. Augmented product

The products which provide additional services and facilities to the customers are called augmented products. Free pen in buying book, free ink in buying copy, free toner in buying computer, television facility, fish curry, fruits, telephone services to the guest of a hotel etc. are augmented products.

5. Potential product

The facilities and benefits to be provided in future are called potential products. Such facilities are included to satisfy and attract customers. Such facilities should be provided to compete in market and attract customers. This gives certain satisfaction, pleasure and facility to the customers. All the five levels of a product can also be presented in a single figure.
Product Levels

Features of Product

Each product should fulfill several needs. In fact, the goods should also solve problems along with satisfying the needs. Besides, the product should be as desired and acceptable. Customers or consumers can get satisfaction from such products only after they are available in markets. The products should also have different attributes of the products available in markets. The main features of the goods can be mentioned as follows:

1. Tangible and intangible

A product contains two attributes: seen and unseen attributes. The thing having both the attributes is called product. The goods which we can touch or see are tangible products. Those which we cannot touch and see are intangible products. Radio, television, book, book-self, chair, table etc. are the features of tangible product. Counseling, advising, thought, ideas, experiences, personality, dignity, respect etc. are unseen services and are called intangible products.

2. Satisfaction of needs

Products satisfy innumerable human needs. The physical materials, things, ideas, experiences, thought etc. which cannot satisfy human needs cannot be said products. Any material, product, goods or ideas, experience or so should compulsorily satisfy one or the other needs of human being to be called product. For example, thirst can be quenched by drinking Coca-Cola, fever can be lessened by taking Citamol. These products satisfy us giving one or the other benefits. So, products must have some attribute to satisfy human needs.

3. Exchange value

Each product has its own attributes. The attributes of the product should also be equal to exchange value. In the absence of exchange value in any product, it cannot be bought. If any product cannot be easily bought and sold, it hampers the marketing activities. When such situation arises, the product cannot satisfy human needs. So, it is compulsory to have exchange value in any products.

4. Related attribute

Every product has different attributes. Among them the attribute to satisfy human need is the important one. Besides this, products should have other attributes also. For example, brand packaging, producer’s or company’s reputation, facilities etc. Because of such attributes in the products, the buyers or intermediaries decide to buy the products. This decision becomes indisputable in or within family or organization.

5. Core of marketing mix

Generally, products, ideas, its development, pricing, promotion and distribution are included in marketing mix. Products can be taken as core of the marketing mix. Pricing, promotion, distribution to the customers, expression of ideas in the absence of products etc. become meaningless. So, products play an important role in marketing mix. Products are necessary for marketing mix as the heart is necessary for human being. Marketing activities cannot be conducted without products.

Factor Determining Organizational Buying Decision

Several factors affect organizational buying decision. They can be grouped in environmental, organizational, interpersonal and personal factors. They are shown as follows:
Factors Affecting Organizational Buying Behavior

I. Environmental Factors

Environment factors affect organizational buying behavior. This includes economic, technological, political-legal, social responsibility and competition.
  1. Economic factors: Economic factors affect organizational buying behavior. This includes level of demand and economic health. The level of demand includes capacity and desire for buying goods. This is affected by income distribution and price of product. Prosperity, recession and recovery are included in economic health. The prosperity condition is economically good condition. Recession is economically bad condition.
  2. Technological factors: Technological factors also affect organizational behavior. This includes level of technology, pace of technology, technology transfer etc. E-commerce as well as information technology has got revolutionary change. It has directly affected organizational buying behavior.
  3. Political and legal factors: Political and legal factors also affect organizational buying process directly. Political factors include political system, political situation, and political thought, government policies etc. whereas constitution, laws, rules and regulations etc. are included in legal factors.
  4. Social responsibility: A business organization should consider social responsibility while buying any goods or services. Indigenous goods should be given preference in buying and interest of society should be protected. Interest of different pressure group of the society also should be considered while buying goods or services.
  5. Competition: Competition also affects buying behavior. This competition includes pure competition, monopolistic competition and oligopoly competition.

II. Organizational Factors

Organizational factors also affect organizational buying behavior. This includes objectives, policies, procedures, organizational structure and system.
  1. Objectives: Buying objective is determined according to organizational goal. Goods should be purchased according to organizational objective. As goods or services need to be purchased according to organizational goal, buying is affected by objective.
  2. Policies: Purchasing or buying policy also effects organizational buying behavior. Goods should be purchased according to buying policy of the organization. If the organization has the policy of buying indigenous goods, the buyer cannot buy foreign goods. If the purchasing policy is silent in this matter, whichever goods, foreign or indigenous, can be purchased as desired.
  3. Procedures: The methods and process adopted by an organization to buy goods or services is called procedure. Goods or services can be purchased directly through agreement, or through tender, demanding catalogue etc. Any of the method can be adopted to buy goods or services. Whichever procedure the organization has adopted, the buyer should follow it.
  4. Organizational structure: Organizational structure defines authority and relations which directly affects buying behavior. In some organizations, goods or services are purchased by direct order of chief executive while in some other organizations, goods or services are bought through purchase department. So, buying behavior is affected by organizational structure.
  5. System: Purchasing system also directly affects buying behavior. An organization can adopt any one or more such as centralized system, decentralized system, huge quantity purchase system and others.

III. Interpersonal Factors

Interpersonal factors also affect buying behavior. This includes authority, status, interest etc.
  1. Authority: The personnel whom the organizational structure gives authority to order for purchase, no goods can be purchased without his order. Buying decision of such authority plays an important role in buying.
  2. Status: The persons to purchase goods or services and to give order for purchase may be different in an organization. As much the behavior of the person issuing purchase order affects behavior of the buyer. If the status or level of the buyer is high, his buying decision becomes rational and quick. His/her behavior becomes mature.
  3. Interest: Users, influencers, buyers, decider and gate keeper are involved in organizational buying process. Their interest affects organizational buying process. As their interest becomes different, buying process may be complicated.

IIII. Personal Factors

Personal factors also affect buying behavior. This includes age of person, education, level of job, personality etc.
  1. Age: Age of person also affects selection and priority. Younger persons make buying decision and supplier selection quicker than older aged persons. Similarly, the younger persons try to find new suppliers whereas older persons try to give continuation to the same who is supplying. So this also affects buying process.
  2. Education: Education makes person able to analyze good or bad. So, an educated person takes buying decision rationally whereas uneducated person makes buying decision at hit and miss/ or hunch. Educated person selects goods or services carefully. So, buyer’s education also affects organizational buying behavior.
  3. Job position: Job position also shows a person’s status. Buyer’s position or status also affects his buying behavior. Buyer’s status may be low or high.
  4. Personality: Personality of person working in an organization may be different. Personality affects selection of quality, brand, price etc. So, buyer’s personality also affects organizational buying behavior.
  5. Risk attitude: Risk bearing capacity of men becomes different. Some can bear more risk and others like to take less risk. Similarly, some like to avoid risk and some others like to face. The capacity and attitude to bear risk also affect buying behavior. The buyers having the capacity to take high risk become aggressive. But those having less risk bearing capacity and having no risk bearing capacity do not do so.

Organizational Buying Behavior: Meaning and Features

Meaning of Organizational Behavior

The behavior of an organization shown in buying goods or services is called organizational buying behavior. The organizations buy goods or services for business use, resale, produce other goods or provide services. Business and industrial organizations buy goods to use in business or produce other goods. Resellers buy goods for reselling them at profitable price. Similarly, government bodies buy goods for office and conducting development program. Non-governmental organizations, hospitals, educational institutes, social organizations, religious organizations etc. buy goods to provide services to their followers or customers.

Users, influencers, buyers, deciders and gate keepers take part in organizational buying process. Users who are the members of organization use bought goods or services. They prepare buying proposal and help in preparing product specification. They also help in preparing special report and analyzing alternatives. Influencers influence buying decision. They help in preparing products specification and analyzing alternatives. Those who buy goods or services are called buyers. Buyers select suppliers and make buying terms and conditions. The person who makes the last decision to buy goods or services from the selected supplier is called decider. Goods are purchased from the supplier selected by the decider. Gatekeeper controls follow of information and other things. Technical staff and personal assistant work as gate keeper.

Organizational buying behavior is influenced by marketing stimuli and other stimuli. Marketing stimuli includes product, price, place and promotion and other stimuli includes economic, technological, political, cultural and competition. These motivators bring changes in the buyers’ behavior after they enter in an organization.
Or these stimuli influence selection of goods or service, selection of suppliers, order, quantities, delivery time, terms and conditions of goods or services etc.

According to Pette D. Bennett, “Organizational buying behavior is the decision making process by which a buying group establishes the needs for goods and services and identifies, evaluate, and chooses among alternative brand and suppliers.”
According to W. M. Pride and O. C. Ferrel, “Organizational buying behavior refers to the purchase behavior of producers, government units, institutions and resellers.”
In conclusion, the behavior shown by an organization while buying goods or services is called organizational buying behavior. User, influencer, buyer, decider and gate keeper are involved in organizational buying process. Organizational buying behavior is influenced by marketing stimuli and other stimuli. Generally, these stimuli influence selection of goods or services, selection of suppliers, buying quantity, terms of delivery, terms of service and terms of payment.

The model of organizational buying behavior can be shown in the following figure:-
The Model of Organizational Buying Behavior

Features of Organizational Buying Behavior

Few buyers, close relationship between buyers and suppliers, rational buyers, direct channel, adaptation of certain purchase policy made by business organization etc. are the main features of organizational buying behavior.

1. Few buyers

As organization itself become buyer, organizational buyers are few in number. But they buy in huge quantity. Organization buyers live scattered in different places.

2. Close relationship

Organizational buyers and suppliers have close relations. It may be long lasting. Such relation has positive effect on future buying. Generally all organizational buyer and suppliers have close relation.

3. Rational buyers

Buyer becomes rational in organizational buying. Professional and trained buyers are involved in buying. So, buying decision becomes rational.

4. Direct channel

As organizational buyers buy a huge quantity, they buy goods directly from producer. So, marketing channel becomes direct. But some organizations buy goods through intermediaries or agencies.

5. Purchase policy

The buying method of organization and persons become different. An organization makes certain policy for buying and buys goods according to the policy. Buying through quotation, buying through tender, buying through contract etc. are the major buying policies of organizations.

Organizational Buying Process

Organizational buying has certain process. The following figure shows organizational buying process. There are eight stages. An organization may go through all of these stages as following or it may change some of them. This depends on buying quantity, buying price, nature of goods, buying frequency etc.
Stages of Organizational Buying Process

1. Need recognition

Organizational buying process starts from need recognition. In an organization, a certain person recognizes need of certain goods and after buying the needed goods, need is fulfilled. Needs in organization can be recognized in two ways. They are: external stimuli and internal stimuli. If a company decides to produce new goods, it is internal stimuli. It needs to buy new goods and equipments. Similarly, when a buyer observes trade exhibition, s/he may make his/her idea to buy new goods. Such idea is external stimuli, because this idea is made from outer environment and materials should be purchased for this.

2. Need description

After the need is recognized, the buyers should describe need. This task is completed in the second stage of organizational buying process. While describing need, features of needed goods and needed quantity should be described. If the goods have standard, this task becomes easy; if otherwise, it becomes complicated. Help of engineers, users and consultants should be taken for complex goods.

3. Product specification

The task of preparing specific description of goods is the third stage of organizational buying process. In this stage, description performance of goods is prepared to solve the problems. Technician’s help should be taken for this task. In this stage, the value of goods is analyzed.

4. Supplier search

At this stage of organizational buying process, the buyer searches proper suppliers or sellers. Buyer prepares a list of suppliers to select good and proper suppliers. This list is prepared by looking at trade directory, searching in Internet, asking other companies for suggestions etc. If the goods to be bought are new, complicated and costly, it needs long time to search suppliers.

5. Proposal solicitation

Proposal solicitation is the fifth stage of organizational buying process. At this stage, buyer calls best suppliers for submitting proposal. As the reaction, some send catalog or sellers to the organization. If the product is costly and complicated, the buyer demands detailed proposal, and if the product is technical, business organization calls for presenting the product itself.

6. Supplier selection

At the sixth stage of organizational buying process, buyers assess the proposal and select one or more suppliers. For selecting the suppliers, a list is prepared and rating is made on the basis of their attribute and importance. Then the best supplier is selected. Analysis of the suppliers is done in the following ways.
Supplier attribute
Rating
Very poor
(1)
Poor
(2)
Fair
(3)
Good
(4)
Excellent
(5)
Price competitiveness
x


Product quality, reliability
x
Service and repair capabilities
x
On-time delivery

x
Quality of sales representatives
x
Overall responsiveness to
customer needs
x
Overall reputation Average
Score = 4.29

x

7. Order routine specification

After the best suppliers have been selected, the buyer prepares final order. In this order, all the matters such as attribute of goods, quantity, specification, time for supply, warranty, method of payment, service after sale etc. should be clearly mentioned.

8. Performance review

This is the last process of organizational buying. At this stage, the buyer reviews suppliers’ performance. This type of review helps to take decision whether to continue relation with the supplier or change or end the relation. If the performance of the supplier is satisfactory, the relation can be continued; if it is somewhat defective, if partial correction is made and the relation is maintained. But if the performance is disagreeable, it is broken.
Stages of the buying process
Buying situations
New
task
Modified
rebuy
Straight
rebuy
1. Problem recognition
Yes
May be
No
2. General need description
Yes
May be
No
3. Product specification
Yes
Yes
Yes
4. Supplier search
Yes
May be
No
5. Proposal solicitation
Yes
May be
No
6. Supplier selection
Yes
May be
No
7. Order-routine specification
Yes
May be
No
8. Performance review
Yes
Yes
Yes

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